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Searching for Irving Fisher

Author

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  • Kris James Mitchener
  • Marc D. Weidenmier

Abstract

There is a long-standing debate as to whether the Fisher effect operated during the classical gold standard period. We break new ground on this question by developing a market-based measure of general inflation expectations during the gold standard. Since the gold-silver price ratio was widely used to track inflation during the gold standard period, we are able to derive a measure of inflation expectations using the interest-rate differential between Austrian silver and gold perpetuity bonds with identical terms. Our empirical evidence suggests that inflation expectations exhibited significant persistence at the weekly, monthly, and annual frequencies. We also find that market participants updated long-run inflation expectations following short-run changes in the forward silver price of gold. The evidence suggests the operation of a long-run Fisher effect during the classical gold standard period.

Suggested Citation

  • Kris James Mitchener & Marc D. Weidenmier, 2010. "Searching for Irving Fisher," NBER Working Papers 15670, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15670
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    References listed on IDEAS

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    5. Barsky, Robert B., 1987. "The Fisher hypothesis and the forecastability and persistence of inflation," Journal of Monetary Economics, Elsevier, vol. 19(1), pages 3-24, January.
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    7. Bordo Michael D. & Kydland Finn E., 1995. "The Gold Standard As a Rule: An Essay in Exploration," Explorations in Economic History, Elsevier, vol. 32(4), pages 423-464, October.
    8. Daniel K. Benjamin & Levis A. Kochin, 1984. "War, Prices, and Interest Rates: A Martial Solution to Gibson's Paradox," NBER Chapters,in: A Retrospective on the Classical Gold Standard, 1821-1931, pages 587-612 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Alfred A. Haug, 2014. "On real interest rate persistence: the role of breaks," Applied Economics, Taylor & Francis Journals, vol. 46(10), pages 1058-1066, April.
    2. Flandreau, Marc & Oosterlinck, Kim, 2012. "Was the emergence of the international gold standard expected? Evidence from Indian Government securities," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 649-669.
    3. Binder, Carola Conces, 2016. "Estimation of historical inflation expectations," Explorations in Economic History, Elsevier, vol. 61(C), pages 1-31.

    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G1 - Financial Economics - - General Financial Markets
    • N2 - Economic History - - Financial Markets and Institutions

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